it is a done deal. it's going to.

hello and welcome to on the money where the business of russia is business i'm peter lavelle lots of news coming out of russia's oil patch a bumpy road for global oil prices and scaling down russia's g.d.p. forecast plus why one of the world's most prominent investors has finally decided to jump into the russian market. to discuss this i'm joined by yet a slightly savalas he's the chief economist at deutsche bank and ben eris he's the editor in chief of business new europe ok gentlemen let's start with our new segment cover your mark or i'd first list is oil prices then where they go in hundred dollars and stay there for for the foreseeable future foreseeable future i see it that. this year and next year as well ok eurozone is in deep trouble and it's going to stay there for several years to come kicking the can down the road they keep kicking the can you know they need to fix it reform structural reforms dealing with it but at the same time they need to spur but of course. it's

a very nasty balance between i think continued problems in the periphery the only hope is that they progress towards the banking union and the fiscal union but that's going to hear words of politically impossible right now ok russia's government spending contract a little bit it's contract it's a lot and so she turned the growth of because they were panicking in the summer of prosper you talk a little bit of it are about panic but about triple surplus right now this year most likely a surplus quite a significant one this year possibly a fiscal surplus next year as they do keep a lid on the level of outlays in the early going there is the first thing if there is a fiscal wanted of using. bad idea each time they do it has less and less effect and it's very expensive it has to be paid back at some point you get nothing for i want to give you exactly it's inflationary and it's hitting the mission returns ease of doing business in russia. going forward we're going to list a bit and we're going to continue going up very very focused on getting the. right

direction but not fast enough ok b.p. rawson if you like it i do i do i think it makes service sense i mean b.p. was dysfunctional. and need to be piece technology and b.p. needs most of this or a new attempt mixed bag in my view but still one of the key issues there is that b.p. has a stake in ross nafta and with that influence ross nast is probably becoming more transparent information. it's up to her. to do with a bad harvest we're expecting to come back down again next year inflation i don't think it's that much of a problem because indeed due to various base affects etc next year it's going to be a little wretches our g.d.p. growth to peak growth as a so turner got turned off by the spending and the general brouhaha in europe which is crust anyone's consumer is still in positive territory. this year and probably even more next year before we forum effort reform efforts going ahead steadily i

see lots of encouraging me to not enough i think we need more and especially on the structural front not enough in mind ok last one u.s. economy and fiscal cliff. are going to go over the top and i. was well i don't think it's that much of a problem it's going to be resolved i think ok gentlemen we're going to go to jim rogers in washington he's an author financial commentator an international investor jim thank you for being with us i guess i'm going to ask you what a lot of people been asking your over the last few weeks why have you decided to invest in russia after all these years of saying you never would. be delighted to be here i guess i agree with most of what they said in fact i'm delighted to see that show russia i've been negative on russia since i first went there in one nine hundred sixty six i've been a bear a pessimist about russia but in the last several months russia russia is changing this is why as i can see is changing when things change peter i want to change

whether that's how you find opportunities what's the can you just give us one example i mean like structural reform currency management i mean you know the way the equity markets are going give us one tip. well there is a structural reform and it's not fast enough i happen to agree with that but at least it's happening for goodness sakes it's not going the other way other things that are happening they set up a fund with international investors you know international best is put up a billion dollars right here puts up a billion dollars side by side they invest they get up if they make money they make money together they lose money they lose money together all of this is new and different in russia over the past ninety five years in fact. because jim's coming to russia you think is going to have a magnet effect people going to come in with him i think i mean there's been a general paul hanging over russia's investment climate for a longest time and no one said anything nice about it but you know i have to remind you in the last decade russian funds were the best performing in the world

a huge amount of the best performing firms to return a three thousand percent and nobody paid any attention to that and i think now we've got some serious investors you know paying some attention that can only be a positive thing you know i think it's very interesting it's a three found three percent return i suppose there are there's a pool of people that don't really want to talk about well i mean russia has indeed been successful in so many ways but at the same time it hasn't been the case that it's been recognized readily there but i think really in some respects even on issues such as corporate governance which always was considered to be the weakest link in russia's investment climate we're seeing finally serious significant change especially if you take things like for example dividend payments jimmy wanted to jump in there so you wave your hand. i did i don't know when the three thousand percent is it's measured and i don't know if it includes the currency yes but remember russia totally collapsed at the end of the one nine hundred ninety s. so sure it's up a lot since then just because there was such

a such a huge collapse i'm not sure that the russian stock market has been such a great stock market in that period of time but be that as it may i think it is changing now and that's all that counts. if it's going to continue to get better then i'm looking for investments in russia i don't have anything invested in russia at the moment peter but i'm looking for a star you're looking at the us have some great great ideas please call me up and we will all this is my channel can do that jimmy could be looking at equities i mean invest in public markets so yes see that the currency and or the public equities that would be the way that i would invest. what would you ask him and as an investor that's a very very exciting there's some there's some other very exciting things happening peter i was you and i were out in lot of our stock recently i mean russia spending a lot of money to develop the east that could be very exciting there gigantic markets out there this idea of a transport corridor across across russia is

a very exciting concept there are many things going on in russia that is if the government has changed is that attitude which i think it has russia could be extremely exciting in many ways just how how do you see russia versus china and other brits and what respects is russia stronger you think like now first of all the whole concept of brics is is a sham an absurd and i've told jim o'neill this he don't know what he was doing when he came up with all of that he never would bend it never invented three of the countries so i totally ignored the idea of bricks and you should too i am more optimistic about china going forward over the next century than i am about russia there billion three hundred million chinese i can go on and on but i'm optimistic about both there's no reason that both nations together if they're in partnership or if they cooperate kate make a fortune there's all of those assets in siberia that china needs russia and china can develop those assets and can be extremely powerful economically but i think one

of the issues there is also that russia as opposed to a lot of the other brics countries that does not have capital controls while virtually all of the others do so i think that's one difference that really isn't that well known out there in the market i think. no no you're exactly right that's one of the great attractions now that i am turning positive about russia that is that for me that's a major positive i don't i have investments in china but i don't like investing in countries would go out of control i'd rather not so it's another attraction of russia. in which you emerging market or an emerging market i mean there's a real contrast here in the one hand you've got a sort of you know less than well developed democracy and on the other hand you've got per capita income the average russia is already more than that of portugal in that sense it's already developed you know european country was sort of you know so what stays in the game is are. you we have to put

a label or i'd rather say it's developed rather than undeveloped but. the point from my point of view is let's find opportunities wherever they are whether the developed countries under developed countries are or deserts if there are opportunities there are opportunities but to your point some parts of russia are terribly undeveloped out in siberia for instance i mean there's there are places that are very very undeveloped but as a whole the nation has done remarkable over the past ten to fifteen twenty years and things that are developed now drive around moscow drive around petersburg you'll see it's developed in just about any place else are there any specific sectors that you like say the consumer sector versus well or do you have any sexual thinks of the stage. well i am more interested in agriculture worldwide and than any other economic sector i think that agriculture which has been a disaster for thirty years is now going to be a very exciting place all of those people who got m.b.a.'s made terrible mistakes

they should have been studying agriculture as far as i'm concerned so agriculture worldwide including russia including russia is exciting for me but i'm looking at everything i haven't looked as hard as i should yet but i because i think they're going to be better opportunities worldwide but i'm looking at anything and everything you know been a number of economists have told me in business people that investing in agriculture is there's only one one one we to return and it's unique you make money off of agriculture right now there's going to something here is how to do it i mean you know there's very few companies to invest into unless you actually buy a farm which people are doing i mean the private equity people are doing but you know i mean looking at publicly listed companies agriculture is kind of thing is doing so private equity could go and buy a farm and brands can put on your store. i'm not going to become a farmer i would be useless at it i am a bit director of a couple of companies one is doing it in brazil one is doing it in australia i mean

advisor to be t. be there in russia and we are investing in farms and other parts of agriculture but there are many ways to do it you can buy agricultural stocks i have a few not many so you can buy fertilizer stock seat stocks tractor stocks many ways to do it worldwide and i didn't say there are many ways to do it in russia let me jump in here gentlemen we're going we're short break and after that short break we'll continue our discussion on russia's economic environment stays with our. the music secret lover touring the two mccurry was able to build a new most sophisticated robot which fortunately doesn't give

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welcome back to on the money i'm peter lavelle before we continue our discussion let's look at some recent events in russia is the russian market. on par with global giants russian energy from rus nafta is supposed to become the world's biggest publicly traded oil company with daily crude oil of more than three million barrels after rick was ition of b.p.'s fifty percent stake in the team crybaby joint venture twenty eight twenty eight billion dollars in cash and stock ross next will miss the. rose in its go already was the largest russian oil company in terms of crude oil production currently it would be the largest oil company in all times

after the two step deal b.p. will receive some twelve billion dollars in cash plus about twenty percent stake in ross next as part of the deal b.p. will. happy to see russ now it's nine person boy russia is an important part of the just business accounting for about a quarter of its oil production b.p. has looked at the country's best resources as it had the company's recall free from the disastrous goldfield in the gulf of mexico maybe cham and hailed the move as an important day for b.p. the russian president vladimir putin expressed his delight as well this sends an excellent signal to the russian market and to the global energy market too and is further evidence of the confidence our partners have been working on the russian more acute this is a good deal a major deal of importance not just for the country's energy center but for the entire russian economy the deal will give crossness extra output and cash flow to

finance exploration of russia's best reserves to replace aging and depleted suit in a wider perspective they do shows that russian business environment is the enemy with a number of serious developments taking place in different sectors such as megaphones forthcoming i.p.o. and suburbans ask you that international on the money r t. ok jim and i to go back to you in washington we have the fiscal cliff approaching the united states at the turn of the year where's a good to go there is there is there enough political will in the united states to move back from what looks like the brink there just before we go back i would go back to agriculture and there are many ways to it in invest in agriculture in is cutting opening but yes there are many ways to invest in agriculture including opening business in the agricultural areas because if i'm right the farmers are going to have the money in the future and it's not the stockbrokers peter you should learn to drive a tractor you know you you maybe have

a second job if you're right how to drive a car how to drive a tractor well i should maybe listen our advice is usually do pretty good job as you go clip. you learn to drive one with you but i would be hopeless at it but as far as the fiscal cliff is going to end yes we have the facts are in the law is this going to happen but congress is going to do something in the politicians are going to do something whatever they do is going to make it worse but we're certainly not going to have the ways the law is written right now because they're all going to come back in a panic in november december and change something but i suspect they'll make it worse in the gym does this make the emerging markets far even more attractive to you because of just the developed markets we look at the dollars on the eurozone they just can't get their act together so you have to look elsewhere well certainly that's one reason i'm looking at russia most of the developed nation america's the largest debtor nation in the history of the world peter had doesn't sound exciting to me you look at places like we were talking about the russia before i mean

they've got a budget surplus i mean these are these are this is magic hearing words like this and you can find things like that in some of the other countries in the world rather than europe in asia so i would urge people that they're looking to buy stocks condom is they should look elsewhere you know we kind of jump in you know the question related question i mean the problem for the longest time has been the perceived risk of doing business here and there's a real risk in the perceived risk is even higher. but do you think that's changed is it just the words in the traditional safe havens and they're looking longer looking very safe and so the everyone is prepared to take more risk with the russian risk is reduced because people are not committing themselves because they're scared of coming here of losing everything well yes i have said many times in the past forty six years you put money in russia the only the tax it away from you or take it away from you know shoot you in the head put you in jail and take it away from you one way or the other so but i in my view yes that has been my perceived risk and the perceived risk of many many people in my view and i hope i'm

making myself clear that perceived risk is no longer as real as it was before things are moving in the right way and russia. and that's why i now after forty six years would like to find ways to invest in russia i could be wrong we'll know in to five or ten years but i'm i'm moving money there jim is there a form one single step that the government you think needs to make in order to gain more credibility with the financial markets that would really be stuff that would be a trigger for a change in sentiment views of you russia well i mentioned the one thing that they've done they've set up these funds where they're where the foreigners and the russians invest side by side i found to me that is compelling that it's extremely compelling i guess they could do things like what is done in the us they have or in some countries they have insurance plans so that if you invest in country x. you are insured your principal is insured doesn't mean you won't lose money but you

are insured against confiscation or something like that against they could do something like that where there were legitimate and reliable independent insurance companies i think that might help a lot i think i don't think it's necessary but. so related to that is the pension reform i think because they really move on financial reform and really render non-state pension funds as active players in the rushes financial markets of the do generate longer term funds and provide a longer time horizons and financial markets i think for a lot of the investors my sense is that this would be precisely the analog of what you're talking about yes and it's as i see it and again i may be wrong you all are closer than all of these things are happening something has happened in the kremlin they realise we've got to do something different i don't know if it's because putin is worried about his place in history or just that he's been around long enough now

to know that other people do things differently from the way the k.g.b. did they for decades i don't know what's happened but it's my perception that something has happened. to me if i'm asked one more question you know eve seen a change in the wind things like the russia direct front and convince you that the there's a new thinking in the kremlin nevertheless russia suffers from this appalling investment image and you can see that in the equity markets and in the other bric countries a very rated russia is yet to do that do you think there's anything to be done about russia's investment image just it's you know it's still got this james bond esque cold war. hanging around it how can russia get rid of that. well the only way the rush is going to get rid of it is for the things to change they are changing but it takes a while for this to say kin you know i said i i still say russia now people say anyway tom of russia you're negative on russia everybody's negative on russia i say i'm changing things and changing i can say that ten times it doesn't say can but

after ten weeks or ten months or ten years of improvements then eventually it sinks in everybody but you want to buy for everybody else figure this out if you want to be a success a successful investor i shouldn't be on his t.v. show talking like this because it might attract other attention i want to i want to of things before other people say that perception is change like investing in china i mean it took a long time for people to realize that things had changed in china it's the only thing actions speak louder than words and as longest china russia continues to act and reform in the right way it will eventually sink in ok let's move on a little bit further jim what do you think the global economy is going to be a year from now ok and what are you worried about most. economists going to be bad a year from now you know two thousand and two as a recession two thousand and seven and eight was worse because the debt is so much higher the next one around two thousand and thirteen two thousand and fourteen is

going to be worse still because the debt in the west anyway and in japan continues to skyrocket this is all going to end badly until somebody somewhere figures out that we can't the solution to too much debt is not more debt peter not more spending the solution to too much debt israel capital spending cuts and real debt reduction that's how you solve the problem but it's not happening ok well jim i mean the world is very interconnected so i mean if you're very very pessimistic on the dollar zone and you and the eurozone it just everybody gets hurt in the process here ok so is that why you're interested in food it sounds very you know going back to the past you will have food ok ok. you make light of it but i mean there's something to that isn't it i mean these people need food peter we could have said that any for the last five hundred five thousand years yes but those things are in agriculture right now in terrible shape we have we have consumed more than we have produced for the last decade the inventories of agricultural products are near

historic lows but worse than that peter we're running out of farmers the average age of farmers in america is fifty eight and your pan it's sixty six in canada is the oldest in recorded history nobody's become a farm we're running out of farmers so the price of food has to go much much higher in order to attract labor capital and management we're not going to have any agricultural products at any price there are no farmers the farmers are dying out you know peter in america more people study public relations study agriculture we don't have been to young people going into farming. and i know a couple of americans and germans that have come to russia to invest in the agricultural sector the been here for almost ten years and it's only now that they're saying they're getting their their money back and close a huge profit so jim's under something yeah the gains in a go to have been some spectacular successes and there's so much upside here i mean some of the most fertile ground in the world and yet the years here are half of

what they are in western europe and the prices keep going up you know it's kind of a no brainer the problem is implementation that's always the difficulty in russia and you've only starting to see some changes in terms of finally russia's agriculture getting that cats. getting the fertilizers and finally the government looking a little cultural group business to examine and looking at the whole complex in a different light as one of the most promising sectors that potentially is the right gateway to economic diversification in russia just one figure in terms of productivity russia's culture. close to ten percent of that in the u.s. i think tremendous scope for catch on the man very positive note well ben and jim thank you very much for being with me and i want to thank our viewers for watching us here on on the money see you next time and stay with r.t. .

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